We see it a lot. Enthusiastic families and individuals coming to open for inspections, sussing out the market and daydreaming about having their own little piece of the Great Australian Dream.
There’s just one thing: They aren’t quite sure if they can afford it.
So how do you know if you are ready to take the leap or not? This handy checklist is a great place to start.
- Contact a Broker or financial Institution.
A good broker is a ‘go-between’ for you and the lenders (banks). A broker can act on your behalf to help determine how much you borrow. A financial institution can offer a similar type of service however they are unlikely to shop around for the best deal for you.
- Get pre-approval first
A good thing to do before you start shopping for your dream home. In short, pre-approval gets your loan sorted so you know how much you can spend.
- Savings history
‘Genuine savings’ is a term used by lenders to define funds that a home loan applicant has saved themselves over time. Australian lenders have required borrowers to save at least 5% of the purchase price of a property in a bank account in their name.
- Loan repayments
Many people will tell you that covering your loan repayments is just the same as rent. But If you don’t factor changes to interest rates as well as your capacity to cover these expenses over time then you might be in trouble over time.
- Mortgage Insurance
Lender’s Mortgage Insurance is a condition of home loan borrowing where your mortgage lender may require you to make a one-off payment to protect them (the lender) against the event where you (the borrower) might fail to make your home loan repayments. This insurance protects the lender and in many cases where the deposit is less than 20%, the borrower will need to pay it.
- Stamp duty
Stamp duty is a tax charged by the government on the sale of property. It is designed to cover the cost of the legal documents for the transaction. The main document is the ownership title of the property and a search to ensure you are buying the property from the right person. The percentage rates on stamp duty in Victoria vary based on dutiable value of the property.
- 10% deposit on signing?
In a standard property sale, the home deposit has to be paid when you exchange the signed copies of the sale contract with the seller (“vendor”), after your offer has been accepted. If you buy at auction, you will sign the contract and pay a deposit (usually 10%) on the spot.
- Other costs to be considered
It is important to factor in the following variable costs when you buy a home as often people come undone when they need to find another $1000 here or there.
- Conveyancer/Solicitor fees.
- Building and pest inspection
- Disbursements at settlement
- Home and contents insurance
- Removalist costs
- Waste disposal costs
- Cross-over payments from last place of residence to new
The best way to keep costs in check is to plan in advance, be aware of what is ahead of you and get advice from a respected agent.